Eliminate Private Mortgage Insurance (PMI)

With inflation putting pressure on consumers, steps to relieve the strain and save money are at a premium. Well, good news!  Due to the rapid increase in home values over the last few years, many homeowners now have an opportunity to improve their cash flow by eliminating their Private Mortgage Insurance (PMI). With PMI costing most borrowers in the $50-200 per month range, removing this expense can provide much-needed relief. So, what can consumers do to eliminate PMI, and what are the best options to take advantage of this potential opportunity?

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What is PMI?

PMI is insurance required by most lenders on conventional home loans when a homebuyer is unable to satisfy a 20% down payment. The intent of the insurance is to protect the mortgage lender in the event a borrower/homeowner defaults on their debt obligation. The cost for PMI is typically determined by considering credit score and the size of a borrower’s down payment below the 20% threshold.  

Traditional ways to eliminate PMI  

There are a few traditional options to eliminate PMI from a conventional loan, but for most borrowers, these options are not viable and certainly do not offer immediate cash flow relief. 

  • Make monthly mortgage payments until home equity equals 22% of the original purchase price. At this point, your PMI will automatically terminate. When equity reaches 20% of the original purchase price, you can request PMI cancellation from your lender.
  • Pay a lump sum to immediately achieve the 20% home equity on the original purchase price and request termination.

Is there a better way to eliminate PMI Now?

If your home experienced significant price appreciation over the past few years, you potentially qualify for immediate relief from your PMI at a minimal cost.  To pursue this option, contact your loan provider for the next steps, but the typical requirements are as follows:

  • You must own your home for at least 2 years and have no late mortgage payments.
  • The mortgage lender will require a new appraisal of your home from an approved appraiser of their choice. The appraisal verifies the increase in your home value and if your home equity now exceeds the 20% equity to loan threshold (*Note: The threshold could be as high as 25% for newer loans*).  While there is a cost for the appraisal of a few hundred dollars to the borrower, the potential savings will likely overwhelm the cost in a short period of time.  Lastly, inquire about your lender’s willingness to accept a Broker Price Opinion (BPO) instead of an appraisal to help save additional money.      

If you are looking for ways to save money and improve cash flow, eliminating your Private Mortgage Insurance can help provide you with some much-needed financial relief. Consult with your loan provider and a certified financial planner to explore the above benefits.


Marshall Clay CFP®, JD, is a Partner and Senior Advisor at The Welch Group, LLC, which specializes in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™.  In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters. 


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